h

2.  Value Delivery Network
◦ The network made up of the company, suppliers,
distributors, and ultimately customers who
“partner” with each other to improve the
performance of the entire system.
 Marketing channel
◦ Set of interdependent organizations involved in
the process of making a product or service
available for use or consumption by the
consumer or business user

3.  Marketing channel: system of marketing
institutions that promotes the physical flow
of goods and services, along with ownership
title, from producers to consumer or business
user; also called a distribution channel

4.  Channel choices affect other decisions in the
marketing mix
◦ Pricing, Marketing communications
 A strong distribution system can be a
competitive advantage
 Channel decisions involve long-term
commitments to other firms

5.  How Channel Members Add Value
◦ Intermediaries require fewer contacts to move the
product to the final purchaser.
◦ Intermediaries help match product assortment
demand with supply.
◦ Intermediaries help bridge major time, place, and
possession gaps that separate products from
those who would use them.

6.  Information gathering
 Consumer motivation
 Negotiating with suppliers
 Placing orders
 Financing
 Inventory management
 Risk bearing
 After sales support

7.  Physical reach
 Customer contact
 Building relationships
 Market feedback
 Understand market trends and keep
principals informed
 Handle price risks
 Finances market credit and inventory
holdings
 Provide after sales service

8.  Number of Channel Levels
◦ The number of intermediary levels indicates the
length of a marketing channel.
 Direct Channels
 Indirect Channels
◦ Producers lose more control and face greater
channel complexity as additional channel levels are
added.

10.  Physical Flow
 Payment Flow
 Information Flow
 Promotion Flow
 Flow of Ownership

11.  Direct channel: marketing channel that
moves goods directly from a producer to
ultimate user
 Direct selling: strategy designed to establish
direct sales contract between producer and
final user

13.  Conventional Distribution Channels
◦ Consists of one or more independent channel
members
◦ Lack leadership and power
◦ Often result in poor performance
 Vertical Marketing Systems
◦ Consists of members acting as a unified system
◦ Use contracts, ownership or power

14.  Vertical marketing system (VMS): planned
channel system designed to improve
distribution efficiency and cost effectiveness
by integrating various functions throughout
the distribution chain
 Three types of VMS:

15.  Corporation owns production and
distribution
 Coordination and conflict through regular
organizational channels
Examples:
Bata, Bombay Dyeing, Raymond
Sears, Goodyear
Suppliers of food items could be also their own supplying firms
- like Nilgiris

16.  Individual firms who join through contracts
 Franchise organizations
◦ Manufacturer-sponsored retailer franchise system
◦ Manufacturer-sponsored wholesaler franchise system
◦ Service-firm-sponsored retailer franchise system

17.  Leadership through the size and power of
dominant channel members
 Leadership could be manufacturer or retailer
 Gains market power by dominating a
channel
 Usually true of dominant brands like GE,
Kodak, Pepsi, Gillette, Coke and HLL in
certain locations
◦ Command high level of co-operation in shelf
space, co-operation from resellers, displays,
pricing policies and promotion strategies

18.  Horizontal Marketing Systems
◦ Companies at the same level work together with
channel members
 Multichannel Distribution Systems
◦ Also called hybrid marketing channels
◦ Occurs when a firm uses two or more marketing
channels
 Company uses different channels to reach / same
or different market segments
◦ Most FMCG companies have separate networks for retail
market and institutions
◦ Most B2B firms use multi-channels for customer
segments like Government, institutions etc

19.  Used in situations where:
◦ Same product but different market segments
◦ Unrelated products in same market – detergents
and ice creams (HLL)
◦ Size of buyers varies
◦ Geographic concentration of potential consumers
varies
◦ Reach is difficult
 Benefits include lower cost, better market
coverage and customized selling